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The Net Neutrality Debate: It’s Simpler Than You Think

The huge, record setting, volume of comments received in the FCC’s (Federal Communications Commission) Open Internet Proceeding, from millions of consumers, along with hundreds of small and large companies in many sectors of the economy, as well as dozens of public interest groups, demonstrates that the topic of Net Neutrality is of great and widespread concern and high priority. It is now clear that the American public is aware that the Internet and the deployment of broadband telecommunications-information-entertainment services are indispensable factors in their daily lives.

However, the content of these comments filed in the FCC’s policy proceeding also indicate that there is great confusion, even among constituencies who are familiar with the wide array of the new services and applications. Many admit that they do not fully understand the implications and are aware that they will be directly affected by the outcomes, especially the stakes and the nature and dynamics of the issues involved. For the most part the public simply does not know what is going on in an indispensable sector of the nation’s economy, even as their daily dependence on it increases.

This situation is probably the result of a continuing and successful campaign by the broadband oligopoly (Comcast, AT&T, and Verizon) to obfuscate — and often conflate — the stakes and their strategies, roles and goals behind a fog of complex technical and legal jargon.

Skeptical opponents of the oligopoly, and there are many, have unfortunately fallen into the trap of viewing and discussing Net Neutrality primarily through the prism of the oligopoly’s jargon, e.g., “paid prioritization,” “peering”, Title II, Section 706, Section 202, “utility regulation,” “forbearance,” etc. Opponents focus on arguments in favor of, or against, the application or value of the various ideas and measures that the oligopoly raises, and neglect to offer alternative scenarios ignored by the oligopoly. They get lost and often confused in the arcane details of these topics that are incomprehensible – and irrelevant – to most people, thus giving the well-funded oligopoly (using money collected from the very customers whose rights they are trying to restrict) an opportunity to brag that they are winning and the U.S. government should move to deregulate them further. So far, the opponents have not offered alternative perspectives and solutions, deliberately overlooked by the oligopoly, that are widely understandable and would help sustain some element of competition in the telecommunication-information-entertainment (T-I-E) industry. Consequently, the oligopoly can characterize the current controversies as philosophical differences, or as “he said, she said” recommendations for a policy that affects everyone, by giving the impression of a false equivalence, i.e., that both opposing points of view are credible, even though one is disproved by irrefutable evidence. If this game continues, the oligopoly will win, and the public interest will lose.

The basic question or challenge of the unfortunately mislabeled “Net Neutrality” issue is not clearly identified, nor is the threat that the oligopoly poses to the welfare of the U.S. exposed convincingly. The self-serving assertions and claims advanced by the oligopoly in the context of this jargon can be clearly and factually demonstrated to be completely false. Framing questions and arguments in the language of the oligopoly diverts attention from, and inhibits understanding, and full appreciation of, the dangerous forces and trends gaining momentum throughout the entire T-I-E industry that is a vital and indispensable component of the economic and social future of the nation and of the individuals and families who live here.

The starting point for relevance and understanding is the answer to the question:
Is the market for broadband access services competitive?

The broadband oligopoly would have us believe, incorrectly, that it is. For if the oligopoly is correct, then there is no, or little, need to worry about the potential for, and adverse effects of, Net or any other form of network-based bias or partisanship.

The oligopoly wants us to believe that “market forces” and “competitive pressures” will guarantee that no participants in the overall value and supply chain of content, applications and services will have the power to distort competition, impede innovation, or charge customers unreasonable prices. “Net Neutrality” will take care of itself without any significant regulatory intervention.

But the broadband access market in the U.S. is clearly not competitive and is likely to remain so into the foreseeable future, in contrast to the intense competition between the much more numerous providers of content, applications, and services. Broadband facilities are part of the public Internet infrastructure but also of other networks with overlapping capabilities, e.g. cable TV, on which customers and these providers are inescapably dependent. Therefore, the broadband access operators enjoy unique “choke point control”. This gives them the power and the motivation, especially if they are vertically integrated as is most obviously Comcast, to negotiate lopsided, discriminatory and commercially unreasonable or mutually beneficial (but only for the direct participants) agreements with third parties, i.e., the so-called edge or over-the-top (OTT) providers, other network operators, and customer equipment or device vendors. They can also act with relative impunity in order to impose undesirable conditions in the contracts their customers have to sign. These customers have few, if any, alternative sources of broadband access that they can turn to, and will confront significant switching costs if they can find one.

The result is an uncompetitive broadband market in which the broadband access providers have accumulated enormous market power and dominance. They must be regulated in order to prevent them from exercising their choke point controls in ways that are harmful to customers, competition, innovation, and the public interest.

The huge broadband network operators are not entrepreneurial innovators who have had to overcome multiple competitors to achieve their market shares. They have enjoyed substantial protection from competition since their origins, thanks to the franchises that have given them privileged access to the use of publicly owned resources, such as rights-of-way and the right to deliver various services to households and other customers.

There is ample evidence from their past and ongoing behavior and actions that they have not hesitated to exploit their choke point control to harm competitors unfairly, restrict the freedom of choice of customers, and extract as much money from the latter as they can in the absence of competitive pricing pressures. There is no reason to expect that, without effective regulation and oversight, they will not do so in future.

The Net Neutrality debate is fundamentally about Broadband Neutrality, and whether, and if so, how broadband access providers should be regulated by the FCC. There can be no real competition without effective, enabling, and protective regulation. Title II, Section 706, antitrust laws, along with other decisions about more or less active forms of intervention, are tools at the disposal of the FCC (and the Department of Justice) in the specific legal, institutional and democratic environment and culture of the U.S. in order to ensure that Broadband Neutrality is achieved and sustained. These tools must be used selectively, intelligently and proportionately. Despite the oligopoly’s claims, there is nothing foreordained about the extent or scope of their application.

Broadband Neutrality is essential in order to support the objective of universal, ubiquitous, and affordable broadband access to the content, applications, and services from among which every customer should be able to choose, without prejudice or unreasonable obstacles created by one or more special interests.

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